Commercial Real Estate Market Outlook

Total commercial property transaction volume for the first nine months of 2015 was $375 billion, up 25% from the same period in 2014 according to Real Capital Analytics (“RCA”).  Capitalization rates for all four major property sectors continue to decline. 

According to CBRE Econometric Advisors (“CBRE-EA”), vacancy rates for all four commercial property sectors showed improvement during the third quarter:

Multifamily – At the end of the third quarter of 2015, the national vacancy rate for multifamily properties was 4.2%, down 10 bps from one year ago and the lowest level recorded since 2001. Sixteen out of the 62 markets tracked by CBRE-EA recorded vacancy rates below 4%, including New York, San Francisco, and Los Angeles.  

Retail – The national retail vacancy rate fell 10 bps to 11.3% in the third quarter of 2015.  CBRE-EA expects low interest rates and lower fuel costs to spur continued retail sales growth.

Office – As of September 30, 2015, the national office vacancy level was 13.4%, down 10 bps from the second quarter 2015 and 80 bps from the prior year.  Downtown markets were especially strong, with a 20 bp reduction in overall vacancy to 10.4%, the lowest level since 2008.

Industrial – The national industrial vacancy level fell 30 bps in the third quarter of 2015, to the pre-recession low of 9.6%.  The vacancy rate in the industrial sector has either remained the same or decreased every quarter for 22 straight quarters, the longest period of continued decline that CBRE-EA has ever recorded.

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